Scott Bluestein: Sure, thanks, Finian. We’re planning for a strong, robust year in terms of originations and growth. We were pretty clear in terms of our positioning last year that we were preparing for an improved origination environment in 2024. That’s what we saw in Q1, and that’s what we expect to see over the next several quarters. Having said that, if there is a quarter where we don’t see deal quality, we’ll pull back — just as we would do in the ordinary course. In terms of how we’re positioning the business and how we’re managing the business now, it’s going to be very consistent with what we did last year, which is to generally be defensive in terms of how we manage the balance sheet. We don’t want to be caught in a position where we end-up low liquidity or over levered because we think that just takes away optionality and flexibility.
So Seth and I and the team are going to continue to focus on making sure we have a strong balance sheet, a healthy liquidity position, and that we’re managing the business relatively conservatively with respect to leverage, so that if we do have an opportunity like we saw in Q1, we’re able to very quickly take advantage of it.
Finian O’Shea: Great. It’s helpful. And a follow-up for Seth is I think I caught the guidance for the adviser dividend to be at least at the midpoint, a little bit below what it started out at? Does that imply a cessation in growth there or less origination or how do we think about that? Thanks.
Seth Meyer: Yeah, sure, Finn. It really in the first instance, the first dividend that we paid in Q4, there’s a little bit of pent-up cash and a little excess earnings and profits that we could distribute and that kind of spilled over into the first quarter as well. So I would stick with the guidance of $1 million to $1.5 million, but we certainly hope that that’s going to continue to grow.
Finian O’Shea: Thank you.
Operator: Thank you for your question. One moment please as I prepare the queue. Our next question comes from the line of Casey Alexander with Compass Point Research and Trading. The floor is yours.
Casey Alexander: Hi, good afternoon. First of all, congratulations on the 20th anniversary. It’s quite an accomplishment in this business. My first question is I totally understand the strategy of being long liquidity in 2023, especially following the upheaval at the beginning of the year. But at what point in time do you start to take the leverage ratio up some in order to more optimize the earnings of the BDC while still being well within the leverage limits. I mean, you could certainly deliver a lot more NII to shareholders if you were running at 1.1 time. And it seems to me that you’re in a much more stable environment than you were three, four quarters ago.
Scott Bluestein: Yeah, thanks Casey. And first thanks for the congratulations. It is a tremendous accomplishment for the company and for the team, and the credit really does go to the team. So thanks for that acknowledgement. In terms of leverage and liquidity, I think if you look at what we just did in Q1, we did begin to take leverage up. We ended the year with GAAP leverage of about 87%. We ended Q1 with GAAP leverage of about 94%. So that’s for us — that’s a pretty meaningful quarterly increase, given that we had over $300 million of net debt portfolio growth. On the Q4 earnings call, Seth and I were clear that we do expect to take leverage up slowly throughout the course of 2024 and that continues to be our intent. Are we going to get to [1.1] (ph)?
Are we going to get to [1.15] (ph)? It’s really difficult to say because that will largely depend on what happens on the prepayment side of the business, but we do expect to continue to take leverage up slowly and cautiously throughout the next several quarters, which will help further drive the profitability of the business.
Casey Alexander: Okay, great. Thank you. Secondly, first quarter is normally kind of a quieter quarter after usually following a year-end rush. And you’ve had basically two years of very lackluster activity and pent-up activity that looks like it’s starting to come to the marketplace and your deal size is so much larger than it was a couple years ago. So I’m curious why you wouldn’t expect your deal activity to be similar to levels of Q1 as the year goes along when deal activity actually traditionally increases.
Scott Bluestein: Yeah, it’s a great question and I would point out a couple of things. Despite the fact that we have the capability now to do significantly larger deals than we did one, two, three, four, five years ago, the average dollars funded for us actually has remained fairly constant. In Q1 of ‘23, for example, which is the year ago period that you just referenced, our average dollars funded per portfolio company was about $21 million. If you look at that data today as of Q1 of ‘24, it’s about $23 million, average dollars funded per [POCO] (ph). So there really hasn’t been that much of an increase in terms of the average dollars, and a lot of that is sort of self-imposed. We are very focused on diversification and granularity within the portfolio.
I think a mistake that a lot of our competitors make is when they chase the big deals and forget about granularity within the portfolio. So we focus very intently on our top five, our top 10 as a percentage of our total book and what that average dollar is outstanding per POCO number is. We do see some opportunity to continue to move upstream and we expect to be able to continue to do that. There were a handful of deals that we booked in Q1 that were larger in nature. There’s a handful of deals that are in our pipeline right now that are also larger in nature, but we’re also still focusing the majority of our time on the bread and butter deals where we think we can continue to add significant value to the ecosystem.
Casey Alexander: All right, thank you for taking my questions.
Scott Bluestein: Thanks, Casey.
Operator: Thank you for your question. One moment, please. Our next question comes from the line of John Hecht of Jefferies. The floor is yours.
John Hecht: Afternoon guys, thanks for taking my question. First one is, were the fundings, I guess the timing of the fundings, were they kind of skewed toward the back end of the quarter? I don’t think that’s untypical. But just because you have such substantial growth but your interest income was somewhat flat with last quarter.
